Uber faces a major challenge to its business model in New Zealand, with drivers arguing in the Employment Court that they are employees, not self-employed contractors. The case follows a succession of international rulings that have gone against the rideshare giant, writes Rebecca Macfie
“Peter, make money in Wellington driving with Uber,” implored the note in the email subject line. “Get behind the wheel. You could earn NZD 33 [sic] an hour including tips when you drive with Uber.”
The unsolicited invitation to drive and thrive popped into the inbox of union lawyer Peter Cranney just before lunch-time on Monday. Uber’s algorithm evidently failed to detect that Cranney had just moments earlier finished delivering his opening submissions in a case seeking to overturn the rideshare company’s presumption that its drivers are independent contractors, and that they are instead employees entitled to the full suite of employment law protection.
Later on the first day of the case, the Employment Court heard financial evidence suggesting that Cranney – should he choose to hang up his gown and log on to the Uber app – would probably earn less than half of the $33 claimed.
It’s possible to deduce this because Uber tracks drivers’ every movement: how many hours they spend logged on to the app, how many hours spent driving customers or delivering restaurant “eats”, how many hours spent en route to jobs, how many hours spent driving around waiting for jobs.
Evidence presented in court yesterday showed that drivers get paid for only about half of the time they are working for Uber – the hours spent actually driving customers or delivering meals.
In the case of Praful Rama, one of four drivers who will give evidence in the case, that means his hourly rate in the year to March 2021 was just $14.43, after paying Uber’s $3700 “service fee”, $1257 in other Uber charges, covering vehicle and other costs, and allowing for holidays and sickness. These numbers broadly line up with a 2021 survey of gig workers – most of them Uber drivers – by First Union, which found more than half calculated their hourly rate after costs was below the minimum wage.
If the plaintiffs in the case – E tū and First Union – are successful in their argument that Rama and other drivers are employees, Uber will be forced to pay the minimum wage (currently $21.20), holiday pay, sick pay and parental leave, and drivers will have the right to collectively bargain, and have legal recourse against unjustifiable dismissal.
The case will draw on a substantial body of case law distinguishing people who are genuine contractors running independent businesses from those who are in an employment relationship with the company they work for. However, it is arguably the most significant such case to come before the Employment Court, given that it involves a challenge to the global rideshare giant’s business model by the country’s two biggest private sector unions.
The hearing is set down for three weeks before Chief Employment Court Judge Christina Inglis. A month ago, Judge Inglis ruled that children in the Gloriavale community had been employees from the age of six, not simply doing “chores” as claimed by community leaders. The Gloriavale case will have relevance to the Uber hearing in that it further refines the case law around the nature of the employment relationship, and the statutory duty on the courts to look beyond written contracts and statements of intention to the substance of the relationship.
The case will also build on a growing body of international case law, the bulk of which has gone against Uber and its claim that it is merely a technology provider, and that drivers are contractors.
Cranney laid out the international developments, starting with a 2017 ruling of the European Court of Justice that found Uber to be a transport service, not merely an “information” service, and that it exercised “decisive influence” over drivers, including setting fares and exercising the right to block them from the app.
In 2020, one of France’s highest courts found Uber was an employer, in a case brought by a driver who had been booted off the app. The Cour de Cassation ruled the driver’s independent status was “fictitious”, and that Uber exercised control by setting fares, imposing the route, issuing sanctions if a driver refused three or more rides, and retaining the power to permanently lock a driver out of the app.
In early 2021 the UK Supreme Court ruled that Uber drivers were “workers” under that country’s labour law (an intermediate classification that doesn’t exist here). Similar arguments were run: Uber set the fares, imposed the contract terms including the “service fee” deducted from drivers’ earnings, and severely constrained drivers’ ability to refuse rides. By withholding the passenger’s destination until the driver accepted the ride, Uber controlled the information that would enable a driver to decide whether it was a ride worth accepting.
The UK court referred to Uber’s infamous passenger rating system – which can lead to warnings and termination from the app – as a “potent method of control” over drivers and a “classic form of subordination that is characteristic of employment relationships.”
Drivers’ “inability to offer a distinctive service or set their own prices, and Uber’s control over all aspects of their interaction with passengers mean that they have little or no ability to improve their economic position through professional or entrepreneurial skill. In practice, the only way in which they can increase their earnings is by working longer hours while constantly meeting Uber’s measures of performance.”
After the UK decision, Uber agreed to recognise a trade union for the first time, enabling 70,000 workers to negotiate wages, holidays and sick pay.
Most recently, a court in the Netherlands – Uber’s home country – found drivers were employees, after hearing a similar range of arguments about the extent and nature of the company’s control over them.
A departure from the international case law was a decision of New Zealand Employment Court Judge Joanna Holden in late 2020, who found that driver Atapattu Arachchige – who went to court after being thrown off the app when a customer complained – was a contractor, not an employee (and therefore barred from fighting his dismissal).
Cranney told the court yesterday that Uber can “do what they like” in its relationship with drivers. There were “elements of servility” that were “repugnant to the common law”, characterised by Uber’s ability to unilaterally change the contract at any time, and to terminate a driver at any time for any reason.
The contracts also contained a “repressive” provision stating that if a driver was deemed by law to be an employee, the driver would “indemnify, defend…and hold [Uber] harmless from and against any claims…”
First Union strategic project co-ordinator Anita Rosentreter told the court that the plaintiff unions believe drivers are “subordinate to and dependent upon Uber…The degree of control Uber exercises over Uber drivers’ work, performance and earnings is significant. [The unions] have noted the obvious imbalance of power between Uber and Uber drivers; and that Uber drivers are vulnerable and prone to exploitation.”
Uber does not hesitate to warn, suspend or deactivate drivers for alleged negative customer feedback, regardless of whether such an allegation is substantiated, she said. “Drivers are often given no real opportunity to defend themselves before actions are taken against them.”
There is no possibility that drivers can develop their own customer base, said Rosentreter. They are prohibited from contacting Uber customers after they have completed a ride, other than to return lost property. The business model “prohibits Uber drivers from cutting Uber out,” she said.
A large volume of operational detail about how Uber deals with drivers has been obtained under discovery by the plaintiffs. However, much of Rosentreter’s evidence referring to this material is subject to an interim suppression order, while Chief Judge Inglis considers a request from Uber for a wide-ranging non-publication order. The company claims publication would enable competitors to use the information and undermine the Uber platform.
